Onex Reports Full-Year 2013 Results

Onex Corporation ("Onex") (TSX:OCX) today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2013 and an update on matters following year-end.

Highlights

In June, Onex Partners III acquired the largest operator of tradeshows in the United States, Emerald Expositions ("Emerald"), in a transaction valued at $950 million. In January 2014, Emerald acquired George Little Management, LLC, adding more than 20 leading tradeshows, including the largest show in the New York metropolitan area. The total equity investment for both transactions was $490 million, of which Onex' share was $119 million.

Distributions during 2013 from our private equity funds, Onex Partners and ONCAP, totalled $2.9 billion - the second highest year in Onex' history. Onex' share of distributions was $1.1 billion, including $75 million of carried interest. Realizations included the recapitalization of Carestream Health, the sale of shares of Allison Transmission in secondary offerings, and the sales of RSI Home Products, TMS International, BSN SPORTS and Caliber Collision Centers ("Caliber"). The sale of Caliber is particularly noteworthy as ONCAP II generated returns of 7.5 times the capital invested.

Onex Partners and ONCAP operating companies collectively raised or refinanced a total of $8.9 billion of debt, and paid down debt totalling approximately $1.1 billion in 2013.

Including realizations and distributions, Onex Partners' and ONCAP's private companies generated returns for Onex of 34% during 2013. Including our public companies, the value of all operating businesses in the Onex Partners and ONCAP Funds, including realizations and distributions, increased by 35% during 2013.

Including its year-end cash and near-cash equivalents balance of $1.7 billion, Onex' proprietary capital grew last year to $5.8 billion, representing a 23% increase on a per-share basis to $50.93 (C$54.16).

Onex Credit Partners completed two collateralized loan obligation ("CLO") offerings, raising more than $1.0 billion, including $64 million from Onex, and has established a warehouse facility for a fifth CLO.

In 2013, Onex launched the fundraising for Onex Partners IV, and to date has raised a total of $3.7 billion in aggregate commitments towards its $4.5 billion target, including Onex' $1.2 billion commitment.

Building our Businesses

"We had some very gratifying realizations in 2013," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. "In particular, investors recognized the great job done at Carestream Health in growing its digital imaging business and maintaining tight control throughout. As well, Caliber's aggressive acquisition and integration strategy really paid off for investors. Looking forward, with $1.7 billion in cash and near-cash equivalents and $3.4 billion in committed, undrawn capital, we will be aggressively looking for more businesses to buy and build in 2014."

By transforming good businesses into industry leaders, Onex has generated a 29-year gross IRR of 28% and a multiple of 3.0 times invested capital from realized, substantially realized and publicly traded investments.

In addition to the firm's commitment to every business, the Onex management team continues to be heavily invested in everything Onex owns. At December 31, 2013, the value of the team's investment in our businesses and Onex shares was approximately $1.7 billion.

Onex officially launched fundraising of Onex Partners IV in 2013, targeting a fund size of $4.5 billion in total capital commitments. To date, Onex has raised $3.7 billion in aggregate commitments, including Onex' $1.2 billion commitment, and expects to complete fundraising in 2014. This new fund will contribute to Onex' stream of annual management fees and the potential to earn carried interest on invested limited partner capital. Onex' limited partnership agreements typically have a 10-year term and provide predictable management fees from assets under management. Although fees for Onex Partners III decreased to 1% of invested capital effective December 2013, the end of its original five-year commitment period, we expect to start drawing management fees for Onex Partners IV sometime in 2014.

At December 31, 2013, the value of Onex' unrealized carried interest was approximately $54 million based on the traded market values of Onex Partners' public companies and a further $148 million based on the year-end valuations of the private businesses. These year-end values reflect a $137 million increase in the value of Onex' carried interest including the impact of $75 million of realized carried interest received during the year. The amount of carried interest ultimately realized by Onex depends on the overall performance of each Fund.

We continue to see growth in Onex Credit Partners. During 2013, two CLO offerings totalling more than $1.0 billion closed, bringing Onex Credit Partners' year-end assets under management to $3.3 billion - a 44% increase over the prior year. As this investing platform continues to grow, so too will the recurring management fees, creating additional value for Onex shareholders.

Creating Value for Shareholders

Onex' long-term goal is to grow its capital per share on average by at least 15% per annum. For the twelve months ended December 31, 2013, Onex' proprietary capital per share grew by 23% to $50.93 (C$54.16).

Our goal is to have the value of Onex' shares reflect both the growth in the value of our assets and the intrinsic value of our asset management capabilities. At December 31, 2013, Onex' Subordinate Voting Shares ("SVS") closed at C$57.35, a 37% increase from December 31, 2012. This compares to a 30% increase in the S&P 500 and a 10% increase in the S&P/TSX Composite Index.

The Company paid a fourth-quarter dividend of C$0.0375 per SVS on January 31, 2014 to shareholders of record on January 10, 2014.

In 2013, Onex repurchased 3,060,400 SVS for a total cost of $153 million or an average cost per share of C$51.81. In January 2014, Onex repurchased 397,200 SVS for a total cost of $21 million or an average cost per share of C$57.01. Over the last 17 years, Onex has repurchased more than 80 million SVS for a total cost of approximately C$1.4 billion.

Consolidated Results

Onex' quarterly and full-year consolidated financial results do not follow any specific trends due to acquisitions and dispositions of businesses, changes in the value of its publicly traded and privately held operating companies and varying business cycles at its operating companies.

On a consolidated basis for the fourth quarter, revenues increased 10% to $7.0 billion compared to the same period of the prior year. Onex reported a consolidated net loss of $223 million compared to a loss of $83 million in the fourth quarter of 2012.

On a consolidated basis for the full year ended December 31, 2013, revenues increased 12% to $27.8 billion consistent with the change in the quarter. The net loss for the year was $813 million compared to net earnings of $16 million for the year prior. This change was primarily driven by a greater increase in the fair value of the limited partners' interest in our operating businesses that is recorded as a liability, which resulted in approximately $750 million in increased charges to Onex' consolidated net earnings. In addition, the aerostructures segment reported a loss primarily as a result of forward-loss charges on long-term contracts.

Attached are the Consolidated Balance Sheets, Statements of Earnings, Statements of Cash Flows and information by industry segment for the full year ended December 31, 2013 and 2012 as prepared under International Financial Reporting Standards. The complete financial statements, including Management's Discussion and Analysis of the results, are posted on Onex' website, www.onex.com, and are also available on SEDAR at www.sedar.com. Also attached are the "How We Are Invested" schedule, which details Onex' $5.8 billion of proprietary capital and provides public and private company performance information, and the Schedule of Fees and Expenses.

Webcast

Onex management will host a conference call to review Onex' fiscal 2013 results on Friday, February 21 at 11:00 a.m. ET. A live webcast of this conference call will be available in listen-only mode on its website, www.onex.com.

About Onex

With offices in Toronto, New York and London, Onex is one of the oldest and most successful private equity firms. Onex acquires and builds high-quality businesses in partnership with talented management teams. The Company has approximately $19 billion of assets under management, including $6 billion of Onex capital, in private equity, credit securities and real estate. Onex invests its capital directly and as the largest limited partner in each of its Funds.

Onex' businesses have assets of $44 billion, generate annual revenues of $33 billion and employ approximately 232,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX. For more information on Onex, visit its website at www.onex.com. The Company's security filings can also be accessed at www.sedar.com.

This news release may contain forward-looking statements that are based on management's current expectations and are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements. Onex is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.

HOW WE ARE INVESTED

All dollar amounts, unless otherwise noted, are in millions of U.S. dollars.

Based on the US$ fair value of the investments in Onex Partners' financial statements net of the estimated Management Investment Plan ("MIP") liability on these investments of $64 million (2012 - $39 million). RSI, which was sold in February 2013, was included in private companies of Onex Partners at December 31, 2012.

(2)

Based on the closing market values and net of the estimated MIP liability on these investments. TMS International, which was sold in October 2013, was included in public companies of Onex Partners at December 31, 2012.

(3)

Represents Onex' share of the unrealized carried interest on public and private companies in the Onex Partners Funds.

(4)

Based on the C$ fair value of the investments in ONCAP's financial statements net of management incentive programs on these investments of $17 million (2012 - $25 million) and a US$/C$ exchange rate of 1.0636 (2012 - 0.9949). BSN SPORTS, which was sold in June 2013, and Caliber Collision, which was sold in November 2013, were included in ONCAP at December 31, 2012.

(5)

Based on the fair value.

(6)

Based on the fair value of Onex Real Estate Partners' investments.

(7)

Based on the market values of investments in Onex Credit Partners' Funds and Onex Credit Partners Collateralized Loan Obligations, including the warehouse facility for OCP CLO-5. Excludes $343 million (2012 - $328 million) invested in a segregated Onex Credit Partners' unleveraged senior secured loan strategy fund, which is included with cash and near-cash items.

The change in Onex Capital per Share during the year is driven primarily by fair value changes of Onex' investments. Share repurchases and options exercised during the year will have an impact on the calculation of Onex Capital per Share. The impact on Onex Capital per Share will be to the extent that the price for share repurchases and option exercises is above or below the Onex Capital per Share.

HOW WE ARE INVESTED

Public and Private Company Information

Public Companies

As at December 31, 2013

Shares
Subject to
Carried
Interest
(millions)

Shares
Held
by Onex
(millions)

Closing Price
per Share(1)

Market Value
of Onex'
Investment

Onex Partners

Skilled Healthcare Group(2)

10.7

3.5

$

4.81

$

17

Spirit AeroSystems(2)

11.9

6.5

$

34.08

220

Allison Transmission(2)

22.1

15.5

$

27.61

427

664

Estimated Management Investment Plan Liability

(37

)

627

Direct Investments - Celestica

-

17.8(3

)

$

10.40

186

$

813

Significant Private Companies

As at December 31, 2013

Onex' and
its Limited
Partners'
Ownership

LTM
EBITDA(4)

Net
Debt

Cumulative
Distributions

Onex'
Economic
Ownership

Original
Cost of
Onex'
Investment

Onex Partners

The Warranty Group

91

%

$

114(5

)

$

246(5

)

$

403

29

%

$

154

Carestream Health

92

%

436

2,150

1,311

33%(3

)

186

Tropicana Las Vegas

82

%

(4

)

51

-

18

%

70

Tomkins

56

%

559(6

)

1,428

1,180(7

)

14

%

315

ResCare

98

%

141

350

-

20

%

41

JELD-WEN

72%(8

)

154(9

)

654(9

)

-

18%(8

)

200(10

)

SGS International

93

%

111(11

)

579

-

23

%

66

USI

92

%

267(11

)

1,596

-

26

%

170(12

)

BBAM(13)

50

%

86

(33)(14

)

49(15

)

13

%

61

KraussMaffei

96

%

EUR 103

EUR 226

-

24

%

92(16

)

Emerald Expositions

99

%

93

605

-

24

%

85

1,440

Direct Investments - Sitel Worldwide

70

%

$

130

$

743

$

-

70

%

251

$

1,691

(1)

Closing prices on December 31, 2013.

(2)

Excludes Onex' potential participation in the carried interest and includes shares related to the MIP.

(3)

Excludes shares held in connection with the MIP.

(4)

EBITDA is a non-GAAP measure and is based on the local GAAP of the individual operating companies. These adjustments may include non-cash costs of stock-based compensation and retention plans, transition and restructuring expenses including severance payments, the impact of derivative instruments that no longer qualify for hedge accounting, the impacts of purchase accounting and other similar amounts.

(5)

Amount presented for The Warranty Group is net earnings rather than EBITDA and total debt rather than net debt.

(6)

LTM EBITDA excludes EBITDA from businesses divested as of December 31, 2013.

Onex' and its limited partners' investment is in convertible preferred shares. The ownership percentage is presented on an as-converted basis.

(9)

LTM EBITDA and net debt are presented for JELD-WEN Holding, inc.

(10)

Net of $27 million return of capital on the convertible promissory notes prior to the conversion into additional Series A Convertible Preferred Stock of JELD-WEN in April 2013.

(11)

LTM EBITDA for SGS International and USI is presented on a pro-forma basis to reflect the impact of acquired businesses.

(12)

Net of $84 million of the amount originally invested in USI sold by Onex to certain limited partners and others as a co-investment in March 2013.

(13)

Ownership percentages, LTM EBITDA, net debt and cumulative distributions are presented for BBAM Limited Partnership and do not reflect information for Onex' investments in FLY Leasing Limited (NYSE: FLY) or Meridian Aviation Partners Limited that were made in conjunction with the investment in BBAM. The Original Cost of Onex' Investment includes $5 million invested in FLY Leasing Limited and $14 million invested in Meridian Aviation Partners Limited.

Onex, Onex Partners III and Onex management received distributions of $24 million from BBAM.

(16)

The investments in KraussMaffei were made in euros and converted to U.S. dollars using the prevailing exchange rate on the date of the investments.

Schedule of Fees and Expenses

Year ended December 31,

(USD Millions)

2013

2012

2011

Revenue Items

Management and Advisory Fees1

Base Management Fees

$

111

$

108

$

110

Transaction Fees, Net

1

5

-

Total Management and Advisory Fees

112

113

110

Carried Interest and Performance Fees Received2

81

6

72

Interest and Other Treasury Income

Cash and Near-Cash

18

20

7

Onex Credit Partners3

31

19

1

Total Interest and Other Treasury Income

49

39

8

Total

242

158

190

Expense Items4

Compensation

Base Compensation (incl. benefits)

33

29

29

Variable Compensation

103

67

88

136

96

117

Other Expense Items, Net

30

21

33

Total

166

117

150

Net Amount

$

76

$

41

$

40

1

The management fees include those earned in the Onex Partners and ONCAP private equity funds, those earned by Onex Credit Partners manager and Onex' retained portion of the management fees from operating companies.

2

Carried interest and performance fees received are on a cash received basis.

3

Onex Credit Partners includes the returns on Onex' investment as a limited partner in Onex Credit Partners funds and, beginning in 2012, the returns on Onex' investments in Onex Credit Partners' collateralized loan obligations. The returns on Onex' investment as a limited partner in a segregated Onex Credit Partners' unleveraged senior secured loan strategy fund are included with cash and near-cash.

4

Expenses include those of the Onex corporate office, ONCAP, Onex Credit Partners and Onex Real Estate Partners. There is no allocation of the expenses to the management of Onex' $5.8 billion of capital. The expenses exclude stock-based compensation.

Onex Corporation

CONSOLIDATED BALANCE SHEETS

(in millions of U.S. dollars)

As atDecember 31, 2013

As at
December 31, 2012

As at
January 1, 2012

Assets
Current assets

Cash and cash equivalents

$

3,191

$

2,656

$

2,448

Short-term investments

754

730

749

Accounts receivable

3,639

3,858

3,272

Inventories

3,872

4,519

4,428

Other current assets

1,478

1,443

1,154

12,934

13,206

12,051

Property, plant and equipment

5,105

5,495

5,102

Long-term investments

7,564

6,424

5,415

Other non-current assets

2,100

1,986

1,776

Intangible assets

4,695

4,833

2,599

Goodwill

4,469

4,358

2,434

$

36,867

$

36,302

$

29,377

Liabilities and Equity

Current liabilities

Accounts payable and accrued liabilities

$

4,342

$

4,549

$

3,893

Current portion of provisions

331

347

263

Other current liabilities

1,621

1,340

909

Current portion of long-term debt of operating companies, without recourse to Onex Corporation

651

286

482

Current portion of warranty reserves and unearned premiums

1,350

1,366

1,400

8,295

7,888

6,947

Non-current portion of provisions

419

264

180

Long-term debt of operating companies, without recourse to Onex Corporation

11,319

10,184

6,479

Non-current portion of warranty reserves and unearned premiums

1,779

1,774

1,727

Other non-current liabilities

2,526

2,852

2,368

Deferred income taxes

1,225

1,683

1,059

Limited Partners' Interests

6,959

6,208

4,980

32,522

30,853

23,740

Equity

Share capital

346

358

360

Non-controlling interests

3,191

3,822

3,863

Retained earnings and accumulated other comprehensive earnings

808

1,269

1,414

4,345

5,449

5,637

$

36,867

$

36,302

$

29,377

Onex Corporation

CONSOLIDATED STATEMENTS OF EARNINGS

Year ended December 31 (in millions of U.S. dollars except per share data)